OTCQX:DMMIF - Post by User
Post by
whiteirishon Feb 09, 2019 8:12pm
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Post# 29342947
Good news for mining from Ecuador
Good news for mining from Ecuador
This news is now ten days old (or so) and was reported to subscribers of The IKN Weekly last Sunday in IKN506. As it still hasn't got the amount of recognition it deserves (outside of the pop in LUG.to at the time), here's the note as published:
Ecuador: Significant changes to the mining tax regime
A big positive out of Ecuador last week was the news (15) that the mooted changes in State burdens on mining are now official. The main changes are:
- The elimination of the Windfall Tax (WFT), which was always a line item that caused more heat than light but was a detrimental element to the marketing and image of Ecuador mining abroad.
- Investment dollars are now tax deductible on remittance profits. That’s to say, if you are Lundin Gold (LUG.to) and you invest U$800m in FDI at FDN (so to speak), that’s now a tax credit on profits.
- State royalties that were previously on a sliding scale of between 5% and 8% (depending on metal type, mine size, gross metal values etc) are now calculated on a sliding scale of between 3% and 8%, providing some relief if profit margins get thinner than expected.
All these things are positives for the mining industry in Ecuador and that’s me, the notably leery one on the country and its potential for mining investment, telling you that. It’s no surprise that just about the safest way of playing the formal Ecuador mining industry, Lundin Gold (LUG.to), took a big hike last week on the news, with the main 1.4m share trades going through on the day of the tax overhaul announcement.
The $5.54 close on Friday is the best price for LUG.to since May 2017. Because LUG.to has done an excellent job in community relations and has built out FDN (so far) without much fuss of disruption, as well as paying its “advanced royalties” dues to the local and national governments, it’s about the only project I’d feel comfortable about owning in the country. However, the newly relaxed State burden regime (particularly the tax credit for investment now clear and without question) is a significant and positive step forward for Ecuador.